What is an investment? How does it work? Are financial investments worth the risk? In this article, we’ll look at how you can make money from investment.
What Is Investment?
An investment is more than just putting your cash into a bank account where it will sit and earn interest. An investment is risky. There are no secure guaranteed returns when it comes to investment- you’re taking a risk with your investment. Hopefully you will make a lot more than you put in, but there is also a possibility that you will make a loss and end up with less than you started.
You can invest in almost anything. Conventional investments include: Stocks, shares, bonds, real estate, government bonds, and funds. You can also invest in cars, farms, wine, art, and much more.
How Do You Invest in the Stock Market?
Put simply, when investing in the stock market you will be buying shares in one or more companies with the aim of making a profit.
The first rule of investing is that you shouldn’t invest any money that you cannot afford to lose. While the ultimate aim is to make a profit, there is always a risk attached.
While you may think of stock markets being frenzied places where people buy and sell in a manic fashion, the reality of long-term investing is probably more mundane. Find a few shares or funds that you like the look of, keep an eye on how they perform and then cash them in when you need to.
You may need the assistance of a financial advisor such as the ones on the ARQ Wealth Website.
How Do Stock Markets Work?
A stock market is a place where buyers and sellers meet to sell shares. Each share is a small fraction of one company.
Once you own that small fraction of a company, you can sell it to anyone that wants to buy it.
What Makes a Company Share Price Fall and Rise?
The price of the shares are initially set by the company that are offering them, however, the share’s price can change on any given day based on the company’s performance , the economic state of the country, and sentiment.
Sentiment means that if those working in the financial sector think that a business will struggle, then its price will fall. If a company grows rapidly in a year and prospects look good then it will likely rise in value.
Remember the Three Golden Rules of Investment
- The greater the return you are hoping for, the greater the risk that you’ll have to accept will be.
- If you are saving over the short term it is wise not to take too much of a risk. Think about investments being for the longer term. You should consider investing over a period of around five years. If you can’t afford for your cash to be tied up for that long, you should keep your money in a savings account.
- Share your investments across a wide range of stocks and shares. Don’t put all of your money on one company.